Principles of Microeconomics - Quiz 1

Suppose an airline determines that its customers traveling for business have inelastics demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should

decrease the price charged to vacationers and increase the price charged to business travelers

Which two groups of decision makers are included in the circular flow diagram?

households and firms

Resources are

scarce for households and scarce for economies

The production possibilities frontier illustrates

the combinations of output that an economy can produce

The opportunity cost of going to college is

the value of the best opportunity a student gives up to attend college

Factors of Production

used to produce goods and services

Which of these statements best represents the law of demand?

when the price of a good decreases, buyers purchase more of a good

Which of the following statements is NOT correct?

absolute advantage is the driving force of specialization

In a competitive market, the quantity of a product produced and the price of the product are determined by

both buyers and sellers

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good